Economic Insights – Market Follow-Up
The financial markets held their breath for the latest American inflation data and developments in trade policy, as the dollar’s ascent during Wednesday’s trading raised concerns about the potential effects of tariffs on global economic growth.
In the Asian session, the dollar advanced by 0.7 percent to 153.56 yen, surpassing its average movements over the past two hundred days. However, the dollar experienced a slight decline against other currencies, settling at $1.0358 to the euro, according to available data.
In testimony before Congress, Federal Reserve Chairman Jerome Powell reinforced a cautious approach towards interest rate reductions. This sentiment contributed to a rise in ten-year U.S. Treasury yields by approximately four basis points.
Consumer price index data in the U.S. is expected to be disclosed at 1330 GMT. Economists, as surveyed, predict a modest increase in core consumer price inflation of 0.3 percent for January.
The British pound saw a rise of about 0.7 percent, trading at approximately $1.2441 during Asian hours, while the Australian dollar also gained slightly, reaching $0.6291.
The European Union, alongside Mexico and Canada, criticized President Donald Trump’s decision to impose a 25 percent tariff on imports of steel and aluminum. European Commission President Ursula von der Leyen indicated that the EU would respond with countermeasures.
Market participants view the U.S. tariffs as potentially beneficial for the dollar, as they are likely to alter trade dynamics and may prompt other nations to devalue their currencies in response to these taxes.
Nevertheless, analysts caution that the implications of inflation remain uncertain and the effects of tariffs and retaliatory measures are hard to predict, leading investors to exercise caution regarding dollar positions.
The Canadian dollar, which is influenced by these tariffs, rose, approaching a yearly high at 1.4295 per dollar. However, an official from the White House mentioned that the steel tariffs would be accompanied by a 25 percent tax, drawing threats of retaliatory measures from Mexico and Canada.
Meanwhile, the Mexican peso and other emerging market currencies faced pressure, remaining near recently recorded lows.
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